U.S. dividend stocks that also offer quality and growth. Over the past few weeks, Craig McGee, senior consultant at Morningstar Canada, has provided us with a closer examination of some of Morningstar’s proprietary stock indexes. Today, we’re looking at the Morningstar U.S. Dividend Target 50 Index – a selection of 50 U.S. stocks that not only have high dividend yields, but score highly in a combination of other key factors that are indicative of a stock’s underlying quality and potential.
Mr. McGee said that if the index is back-tested to Dec. 31, 1993, using a strategy of selling any stock that falls outside of the top 40 per cent of the overall CPMS database and rebalancing the index quarterly, the result is an annualized total return of 12.2 per cent. The S&P 500 Total Return index generated an annualized return of 8.1 per cent over the same period. For the past five years, the Dividend Target 50 index strategy shows an annualized return of 6.9 per cent, versus 0.4 per cent for the S&P 500 Total Return.